3 minute read 30 Sep 2019
Women looking financial figures in tab at street

What findings show about growing risk and controversy in transfer pricing

By Peter Griffin

Principal, Transfer Pricing, Ernst & Young LLP

Transfer Pricing Principal. PhD economist by training. Loves all sports. Father of two.

3 minute read 30 Sep 2019

The survey results cover a wide range of tax and transfer pricing trends and issues grouped into three principal areas.

This article is part of our Transfer Pricing and International Tax Survey 2019. Since 1995, we have taken the pulse of global transfer pricing every two to three years by collecting and analyzing details on attitudes and experiences across a wide spectrum of taxpayers.

The survey demonstrates executives are recognizing they need to begin taking a more fundamental and strategic approach to transfer pricing. Key steps include elevating the role of the function as well as working with business units to refine core transfer pricing strategy and develop compelling contemporaneous documentation.

Transfer pricing

  • Among survey respondents, 8 out of 10 executives (79%) describe today’s international tax environment as “uncertain,” 40% very much or extremely so.
  • Tax risk is by far the most critical issue driving respondents’ transfer pricing strategies (64%). 
  • Ranking issues of greatest importance, relative to tax risk, the top three are increased information sharing among tax authorities, information being made public or reputational risk and a relative lack of centralized and consistent control in responding to tax authorities.
  • Only a third of the companies maintain contemporaneous documentation of transfer pricing for each country of operation, 45% do so only for high-risk jurisdictions and 22% only “as needed.” 
  • Companies recognize that their transfer pricing documentation is due for an overhaul, with only 11% indicating high satisfaction with their current global transfer pricing documentation process.
  • Only about one in five (22%) see the documentation process as a strategic opportunity to clearly articulate transfer pricing strategy.
  • Fewer than one in five companies (19%) manage their transfer pricing matters solely in-house, 48% outsource or co-source to a single external provider and 33% handle theirs with (or by giving it to) one or more providers. 


  • Forty percent say that challenges to transfer pricing over the past three years have led to double taxation.
  • By far, the areas deemed most critical in terms of tax controversy in the past include:
    • Transfer pricing of goods (64%)
    • Intragroup financial services (41%)
    • Value-added tax (VAT) or goods and services tax (GST) (34%)
  • Going forward, survey respondents expect little-to-no change across most focuses, with two highly notable exceptions:
    • Expectations for challenges to intellectual property (IP) rise to 49% (up from 33%), becoming the second most important issue within tax controversy (up from fourth)
    • Frequency of mention for expected permanent establishment (PE) controversy nearly doubles from 20% to 39%
  • One in five executives (20%) say that within the past three years, their companies have experienced disputes surrounding PE.
  • Eighty-four percent say their tax departments are becoming proactively involved in responding to evolving tax rules surrounding IP, yet only 29% say their businesses are working to identify or bring about value-creating IP
  • To reduce tax risks, 37% of companies are currently using an Advance Pricing Agreement (APA).
  • In terms of satisfaction with APAs, 57% of respondents say they are either very satisfied (18%) or satisfied (39%).
  • Going forward, 43% say they will be significantly more likely to use an APA. 
  • Only one in five (20%) of companies have requested competent authority assistance; but only 15% of these say they have confidence in the process.

Global tax reform 

  • Overall, respondents say the greatest impacts of global tax reform will be felt in fundamental transfer pricing rules.
  • The second and third key areas of impact are PE and thin capitalization rules.
  • When asked to force rank the area of operations that is most impacted by global tax reform, the most frequently cited business component was supply chain (41%), followed by treasury operations and then IP strategy — albeit with significant regional variation.
  • Worldwide, only 16% say the US Tax Cuts and Jobs Act (TCJA) is significantly impacting their tax decisions, with the figure climbing to 35% for US companies. 
  • Few businesses, regardless of geography, are reporting significant changes in behavior as a result of the US Foreign Derived Intangible Income (FDII) regulations.
  • Only a small minority (12%) say they have combed through all the changes amid global tax reform, developed models and formulated a response, with the remainder exhibiting wide-ranging states of readiness.
  • Survey methodology

    The 2019 survey was conducted between March 2019 and June 2019. The survey was distributed via email and conducted using an online tool in English, Spanish, Portuguese, Chinese and Japanese; 87% of respondents chose to complete the survey in English. Routine reminders were sent out to respondents who had not completed the survey.
    Once an adequate number of responses had been recorded, the survey was closed. Any survey with completed responses past the sixth of ten sections of the survey was considered complete for analysis purposes.
    The respondents included 717 tax and finance executives representing more than 20 industry sectors in 43 jurisdictions within the Americas, Europe and Asia-Pacific.
    Figures contained in the report may not add to 100% due to rounding. The report also excludes “don’t know” responses and questions for which no response was given. Questions with fewer than five respondents are not reported in the interest of data confidentiality.


Transfer pricing is undergoing profound change. Beyond dramatic rule changes – driven by BEPS as well as the rise of the digital economy – companies are also experiencing greater information sharing by authorities along with heightened reputational risks. 

About this article

By Peter Griffin

Principal, Transfer Pricing, Ernst & Young LLP

Transfer Pricing Principal. PhD economist by training. Loves all sports. Father of two.